Labour’s low wage betrayal

Political debate is angrier in tone ahead of this month’s general election than it has been for decades. Understandably Brexit is criticised, as it confronts voters with fundamental issues about identity and the direction of their ultimate loyalties. The metropolitan liberal elite deplores the role of so-called “populists” in the referendum debate, and there is no doubt that the Leave verdict depended heavily on support from the low-paid and the less well-educated.

The metropolitan liberals may sneer at the intellectual level of the Leave voters, but that does not mean that the low-paid and the less well-educated behaved irrationally. The Institute for Fiscal Studies recently published an analysis of employee earnings since the Great Recession. A salient conclusion was that wage developments for men with low earnings had been “disastrous” since 2008.

To quote, “Between 2008 and 2014, for men at the 10th percentile [that is, in the bottom 10 per cent] of the weekly earnings distribution, pay [in real terms] fell by 20 per cent.” Some recovery has occurred in the last five years, but even in 2019 real pay is “still 12 per cent below its 2008 level . . . for these people”. The IFS also noted that, perhaps contrary to expectations, the reduction in real earnings has been greatest in the richer regions like London and the south-east, and it has hit people in their thirties the hardest.

The fall in the real incomes of the low-paid is, on the face of it, deeply shocking. It is well known that Britain has a productivity problem, with output per head growing barely at all in the last decade despite the marvels of the internet and the information technology revolution. Output per worker trebled in the 50 years to the Great Recession, but from the start of the Great Recession until today it has gone up by a meagre 2.5 per cent.

All the same, output per worker is on average higher today than in 2008 and people at work should be better-off, if only slightly. It is startling that the IFS analysis, based on impeccable official data, shows that the low-paid are significantly poorer.

What has gone wrong? No doubt a range of influences has been relevant to the situation, and the IFS and other think tanks can assemble large bodies of data, conduct econometric investigations, organise academic seminars and so on. They may also conclude that their results are so provisional that more research, and more research grants, are needed. But an obtrusive reality of modern British politics is that the lower-paid have already made up their minds. Quite simply, they blame mass immigration.

Let us be sophisticated and concede that the citing of numbers does not, in a final sense, prove anything. Nevertheless, the citing of numbers has to be the start of serious inquiry. According to figures prepared by the Office for National Statistics, in autumn 2005 UK-born people held 26.1 million jobs in our labour market, while the foreign-born held 2.9 million. Today UK-born people hold 27.0 million jobs, an increase of slightly more than 3 per cent. Meanwhile the number of jobs held by the foreign-born has climbed to almost 5.8 million jobs, a virtual doubling.

Indeed, in the ghastly years of the Great Recession and its immediate aftermath the UK-born saw almost a million of their jobs disappear, while foreign-born employment rose strongly.

Only in the last four years has UK-born employment moved, with some statistical clarity, ahead of its late-2005 level. But that does not mean everything in the garden is rosy again. Official data highlight enormous increases in self-employment and part-time employment. (To be specific, those in part-time self-employment rose — according to ONS numbers — from 835,000 in the July-September quarter of 2005 to 1,433,000 in the June-August quarter of 2019.)

A reasonable comment is that a surge in foreign-born employment has been accompanied by many years of reduced job opportunity, and consequent economic hardship, for people of British birth, citizenship and residence, if such people happen to be at the bottom of the pile.

As I said, the citing of numbers does not prove anything. (Yes, dear metropolitan liberals, like you I have read Karl Popper.) Perhaps I should not invite the “populist” taunt by saying that the low-paid have good reason for believing that heavy immigration has made life difficult for them. But I will say that. Further, my reading of the statistical evidence is that that the boom in foreign-born employment was particularly in employment of those born in the European Union’s ten 2004 accession countries (Poland, Slovakia, etc).

By implication, it was due to the then Labour government’s decision to welcome immigration from these new EU member states. Is it being suggested that Mr Tony Blair, the darling of the metropolitan liberals, took a decision that cut the living standards of Britain’s lowest-paid workers? Now that would be populism run amok, wouldn’t it?